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Stakeholder Capitalism starts with Purpose

July 30, 2021
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Stakeholder Capitalism starts with Purpose

By Uantchern Loh

Stakeholder capitalism in Malaysia has been given a boost with the introduction of the following paragraph in the revised Malaysian Code on Corporate Governance 2021 (MCCG 2021).

“Stakeholder confidence can only be strengthened if companies think seriously about the reasons for their existence, how they deliver on their purpose, and then explain, in their own words, how the company applies the principle and practices of the MCCG. Such transparency and honesty will support companies in building the trust of its stakeholders and potential investors.”

“Stakeholder confidence can only be strengthened if companies think seriously about the reasons for their existence…”

Companies exist for what their stakeholders believe in.  The Business Roundtable has declared that companies should serve not only their shareholders and maximise profits, but also deliver value to their customers, invest in employees, deal fairly with suppliers, and support the communities in which they operate.  Purpose, as described by Larry Fink, Chairman and CEO of BlackRock, is not the sole pursuit of profits but the animating force for achieving them.  “Purpose is not a mere tagline or marketing campaign.  It is a company’s fundamental reason for being – what it does every day to create value for its stakeholders.”

Practical takeaway – Stakeholder Capitalism starts with purpose.  Understand what your stakeholders believe in and integrate their beliefs and values into your strategy.

“…how they deliver on their purpose”

To succeed in this time of disruption, companies will find that purpose serves to focus on what is important. Companies should consider how their purpose can help the company to grow and open commercial opportunities for long-term success, allowing the company to move forward in a world where ‘business is unusual’.  Purpose and profits are not at odds with each other.  In fact, becoming a purposeful company will be crucial for creating sustainable profits over the long term.  But this can be derailed by culture.  Purpose determines the culture of the company and a misaligned culture can result in strategy being eaten for breakfast.

Practical takeaway – Culture is the result of shared beliefs, values, attitudes, actions, and behaviours in the company.  Make culture a key part of your sustainability and resilience framework.

“…and then explain, in their own words, how the company applies the principle and practices of the MCCG.  Such transparency and honesty will support companies in building the trust of its stakeholders and potential investors”

Truthful and authentic communication plays an integral part in combatting low corporate trust.  A report needs to adhere to the fair, balanced, and understandable principle and it needs to communicate accountability.  However, this does not necessarily generate trust on its own.  Equally, combatting low corporate trust is not simply a matter of transparency and more communication. Companies need to communicate an authentic and company-centric corporate narrative and must be wary of simply regurgitating popular boilerplate words that hold little meaning and only generate more cynicism with stakeholders.  The updated  <IR> Integrated Reporting Framework, which is supported by the MCCG 2021, encourages the holistic communication of value creation, preservation, or erosion over the short, medium, and long-term as the next step in the evolution of corporate reporting

Practical takeaway – In Russian legends there is a person called the yurodivy or a truth-teller.  He questions things that are taken for granted, just like the “An Inconvenient Truth” documentary film about former United States Vice President Al Gore’s campaign to educate people about global warming.  Be willing to be a truth-teller in all your stakeholder communications.


Uantchern Loh is the CEO and Corporate Culture Reporting Practice Leader Black Sun Group (Asia Pacific).

First published in Black Sun plc, Insights/APAC on June 2021.

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